Author Topic: EGFEY - Eurobank  (Read 150164 times)

TwoCitiesCapital

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Re: EGFEY - Eurobank
« Reply #430 on: October 03, 2018, 01:15:19 PM »
35.2% of the total loan book is still NPL's and NPE's are still in the 40% range, the texas ratio is still way to high.

Yes, but formation was negative over the last quarter which is a nice place to be if the trend continues. And, as Bass points out, if loan growth started again, this ratio would drop dramatically as the denominator would expand with good loans. The ratio would be attacked at both the numerator and denominator and drop quickly IF this is the turn-around for the Greek economy.

Agreed on RWAs, but also doesn't quite matter if the wind is blowing at your back instead of in your face. Every year, a portion of the DTAs would be converted to cash which would be tangible equity.

If you truly believe a recovery is around the corner, it makes sense to be bullish on the banks. It's only if you're wrong that things like the NPEs and tangibility of the RWAs matters.

I'm considering nibbling here even though I was burned before. Will wait for another 2-3 quarters of confirming trends before I take a larger bite for the reasons you have pointed out.

Thats the problem for me at least I can find cheap companies in Greece but I don't know if that necessarily makes me bullish on Greece from a macro framework. Here is what I'm trying to say, why try to time the Greek recovery through banks that are worth nothing in the event that things don't improve in the near future because they will have to recapitalize the banks soon if they don't which is what it sounds like Bass is trying to do or pick up the scraps that are trading at sub 5 P/E ratios and crazy discounts to book value even after asset write downs that took place 7 years ago that have proven themselves throughout the crisis.

I agree with waiting, the reason being is that lets say the outcome is between the good and best case scenario, I still think shares will be cheap because of the stigma of it being a Greek Bank. It will be interesting to watch.

And one year later, the share price is right back where it was. Full circle!

Interesting to watch indeed. Glad I only nibbled.


petec

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Re: EGFEY - Eurobank
« Reply #431 on: November 26, 2018, 03:33:37 AM »
Eurobank and Grivalia have just announced that they will merge. Fairfax will own 33% of the newco.

The merger creates a much better capitalised banking group - in effect it is an equity issue by Eurobank in return for a cheap asset. It's accretive (for what that's worth) to earnings and capital ratios but dilutive to Eurobank's bvps.

The merger also gives Grivalia's excellent management team operating control over the big Eurobank real estate portfolio.

Eurobank has also announced plans to speed up bad loan reductions by securitising them and spinning the securities out to shareholders. This cleans the bank's balance sheet but allows shareholders to participate in any upside.

Fairfax controls Grivalia and has seats on both boards so this isn't happening without their approval.

Links:

https://www.eurobank.gr/-/media/eurobank/omilos/grafeio-tupou/etairikes-anakoinoseis/2018/etairiki-anakoinosi-26-11-18/etairiki-anakoinosi-26-11-18-eng.pdf?la=en

https://www.eurobank.gr/-/media/eurobank/omilos/grafeio-tupou/etairikes-anakoinoseis/2018/etairiki-anakoinosi-26-11-18/investor-presentation.pdf?la=en

petec

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Re: EGFEY - Eurobank
« Reply #432 on: March 14, 2019, 10:09:15 AM »
If this used to be on your radar and dropped off, it might be worth kicking the tyres again. The economy is growing, real estate prices are rising, deposits are flowing in, and in 2019 the company will sell or spin a large proportion of its non-performers such that in 2020 they will start provisioning at normalised levels, profits will jump, the DTA will start turning to cash, and capital will accrete.

lathinker

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Re: EGFEY - Eurobank
« Reply #433 on: March 14, 2019, 01:30:10 PM »
petec,

thanks for bringing this up. I think this is a very interesting situation given what I perceive to be a highly creative "stealth recapitalization" of a decent bank with an NPL problem through a lowly levered REIT. If the merger goes through, they have a decent shot of cleaning up their NPL in a manageable period of time.
The spin-off of certain tranches of the NPL securitisation to shareholders feels even more interesting and will combine characteristics of a Greenblatt spinoff situation (people getting securities they have nouse for) with the arguably least popular asset class one might imagine (NPLs in the economically least successful country of the last decade). So definitely worth to stay tuned here.

I own a tiny position

TwoCitiesCapital

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Re: EGFEY - Eurobank
« Reply #434 on: March 14, 2019, 03:45:31 PM »
petec,

thanks for bringing this up. I think this is a very interesting situation given what I perceive to be a highly creative "stealth recapitalization" of a decent bank with an NPL problem through a lowly levered REIT. If the merger goes through, they have a decent shot of cleaning up their NPL in a manageable period of time.
The spin-off of certain tranches of the NPL securitisation to shareholders feels even more interesting and will combine characteristics of a Greenblatt spinoff situation (people getting securities they have nouse for) with the arguably least popular asset class one might imagine (NPLs in the economically least successful country of the last decade). So definitely worth to stay tuned here.

I own a tiny position

I don't think it's a direct spin-off to shareholders. The way I understand it, the bank is restructuring I to a holding co and a bank. The bank will spin-off certain non performing loans to the Hold Co so shareholders still have exposure to upside even if the bank no longer has exposure. You won't be receiving any additional securities from this.

lathinker

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Re: EGFEY - Eurobank
« Reply #435 on: March 15, 2019, 01:10:51 PM »
petec,

thanks for bringing this up. I think this is a very interesting situation given what I perceive to be a highly creative "stealth recapitalization" of a decent bank with an NPL problem through a lowly levered REIT. If the merger goes through, they have a decent shot of cleaning up their NPL in a manageable period of time.
The spin-off of certain tranches of the NPL securitisation to shareholders feels even more interesting and will combine characteristics of a Greenblatt spinoff situation (people getting securities they have nouse for) with the arguably least popular asset class one might imagine (NPLs in the economically least successful country of the last decade). So definitely worth to stay tuned here.

I own a tiny position

I don't think it's a direct spin-off to shareholders. The way I understand it, the bank is restructuring I to a holding co and a bank. The bank will spin-off certain non performing loans to the Hold Co so shareholders still have exposure to upside even if the bank no longer has exposure. You won't be receiving any additional securities from this.

Thanks for pointing out. I had a different understanding and checked in the presentations.
- Page 17 of the November 2018 presentation states "Listing and distribution of B1 Mezzanine and Junior Notes to Eurobank's shareholders.
- In the 2019 presentation they say "Potential listing and distribution of B1 Mezzanine and Junior notes to Eurobank’s shareholders"

So, after all, it may not be clear yet. Why do you understand there will be not listing/distribution?

TwoCitiesCapital

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Re: EGFEY - Eurobank
« Reply #436 on: March 17, 2019, 08:26:30 PM »
petec,

thanks for bringing this up. I think this is a very interesting situation given what I perceive to be a highly creative "stealth recapitalization" of a decent bank with an NPL problem through a lowly levered REIT. If the merger goes through, they have a decent shot of cleaning up their NPL in a manageable period of time.
The spin-off of certain tranches of the NPL securitisation to shareholders feels even more interesting and will combine characteristics of a Greenblatt spinoff situation (people getting securities they have nouse for) with the arguably least popular asset class one might imagine (NPLs in the economically least successful country of the last decade). So definitely worth to stay tuned here.

I own a tiny position

I don't think it's a direct spin-off to shareholders. The way I understand it, the bank is restructuring I to a holding co and a bank. The bank will spin-off certain non performing loans to the Hold Co so shareholders still have exposure to upside even if the bank no longer has exposure. You won't be receiving any additional securities from this.

Thanks for pointing out. I had a different understanding and checked in the presentations.
- Page 17 of the November 2018 presentation states "Listing and distribution of B1 Mezzanine and Junior Notes to Eurobank's shareholders.
- In the 2019 presentation they say "Potential listing and distribution of B1 Mezzanine and Junior notes to Eurobank’s shareholders"

So, after all, it may not be clear yet. Why do you understand there will be not listing/distribution?

There was a chart of the reorganized entity and the spin-off of the assets in the earnings presentation that gave me that impression. P.45-48

https://seekingalpha.com/article/4247025-eurobank-ergasias-sa-adr-2018-q4-results-earnings-call-slides

EDIT: though after second review, it looks like I was recalling phase 2 on p.47. Phase 3 on page 48 does look like a spin directly to shareholders from the Hold Co so...looks like I might be wrong.